I don't understand what the Hungarian government wants from the IMF. One moment they say they don't want funds, and then they say they want 'risk free growth', which must certainly require the IMF's funds? I don't think any of this mess would be necessary had the govt not decided to cripple banks with their fixing of foreign debt.

I don't think any European govt is as inconsistent as Hungary's, and I'm struggling to keep up with the logic.

10:59 pm November 21, 2011

@Confused onlooker wrote:

Stop looking for logic, because there isn't any...Orban Viktor is simply a populist, trying to ride on people's sentiments. He has no clue about money. I would bet that Orban Viktor does not know the difference between "livestock" and "common stock".

It is amateur hour in Budapest, unfortunately

11:32 pm November 21, 2011

Catherine Wunderfrauberg de N. wrote:

Aber mein lieber Herr Nowotny... Didn't Fitch recently predict that Austria's debt/GDP ratio is to peak at 75% in 2012. Which is about the same as Hungary's.

Putting that aside, I would be interested to know what advice you, as a decades-long (former) member of the Austrian Socialist Party, would give to Hungary?

3:56 pm November 23, 2011

Leslie wrote:

To Confused onlooker

The Hungarian government wants from the IMF, that it says that Hungary paid properly its monthly installment and has the firm believe that Hungary will pay its remaining monthly installments in time. The Hungarian government wants also from the IMF, that it says that in case of sudden unexpected financial difficulties it is willing to lend some money on the spot. You heard it right, the Hungarian government doesn't want to take this new IMF fund, only the sudden unexpected financial difficulties can force them to take it. It is called a precautionary agreement. Free growth require the IMF’s funds? Nope, sorry onlooker it doesn't require the IMF’s funds. Hungary has no IMF funds for two years, and still has grown despite the current bad economic environment in the EU, you now the crisis with the PIIGS. You think any of this mess wouldn't be necessary had the govt not decided to cripple banks with their fixing of foreign debt? Think again! First of all, its not called cripling, its called lessening their profits. With temporary crisis taxes and with fixed redemption and with the lack of cheap loans the banks are still profitable with the worst case scenario of beeing nullsaldo. Secondly the fixed redemptions doesn't have anyting to do with the need for IMF money in case of state hardship. The foreign currency debt is for the populace, the IMF doesn't lend money for private persons. The IMF debt is for the state, the merchant banks doesn't lend money for countries. Therefore this mess would be necessary had the govt not decided to cripple banks with their fixing of foreign debt.

I let on the logic for you, so don't struggle anymore! The logic is that the government does everything it can: to avoid bakrupcy, avoid credit downgrade, meeting the "self-imposed" defficit for the EU (made by previous government before the current crisis), increasing GDP growth, paying debt installments in time, rebuff speculants and fear mongers, tax the untaxed, cut the social spending (but carefully), renew debt with as low interest as they can, etc. For that matter the IMF loan is sure, but costs more than selling T-Bills and T-Bonds. First the IMF want things do be done for the loan, like not taxing the EXTRA profits of the merchant banks causing less tax income, like cut the social spending drastically making the government to be hated. T-Bill investors don't have such demands, even if they have such demand, they don't have the possibility to state them, they buy a new bond after the previous matured or not. Secondly and most importantly the T-Bills has currently the interest between yearly 6 and 7 percent in Forints. The IMF loan has interest roughly between DAILY 3 and 5 percents in Euro or Dollar. As you know hungarians pay taxes neither in Euro nor in Dollars.

So the government wants to stay away from the IMF as long as possible, but if they cannot get cheaper funds from the T-Bills, then they are forced to take the expensive loan from the IMF. If the IMF doesn't give a small new loan quickly, then its already big loans (given earlier) would be lost due to bankrupcy. Hungarian bankrupcy can start a domino chain of bankrupcies in the whole world. The IMF won't survive that, so it will give some money.

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